What are and how to measure performance indicators

In this article we will talk about:

• What are Performance Indicators
• What are the performance indicators
• Classification of performance indicators
• Example of performance indicators by area of ​​a company

What are Performance Indicators

Os performance indicators are essential management tools for measuring the performance of a company. With them it is possible to follow the goals outlined in your cash flow are being achieved and the percentage of improvement or worsening in relation to past financial indicators.

Basically, it is possible to measure any activity that generates numbers or values ​​for you, from the number of accesses your site receives and the number of products in stock to the amount of revenue from a product or the number of employees who were fired from the company. The question is to find out which are the most important performance indicators so as not to waste time following those that are not very relevant.

That's where the KPI (acronym in English for 'Key Performance Indicator') comes in, known here in Brazil as a key performance indicator. This is the best way to measure the results of a company, since it does this through its most important indicators and “ignores” indicators that are not very important or that do not directly impact the organization's results.

What are performance indicators for?

The measurement system that will define the performance of a given company will have a set of previously established indicators that must meet the demand of the business, thus analyzing the achievement or not of the targets. Measuring is important for understanding what is happening in management, what changes should be made, and what are the impacts of the changes that have already been made.

In short, to improve you need to measure and you can use several different indicators. Below ready indicators separated by rating in relation to your goal or purpose related to a specific area of ​​the business.

Classification of performance indicators

A possible classification of performance indicators is as follows:

• Strategic Performance Indicators
• Quality performance indicators

See the differences:

Strategic Indicators

In my opinion, this is one of the most important types of indicators, as they can give a broad view of the company's more general objectives and goals, as well as allowing the comparison of previous actions with current results. See an example of our strategic planning worksheet:

Quality Indicators

Usually the quality is linked to the conformity or not of a delivered product or service and, with this, allows to observe failures in the process of production, management or provision of a service. In the case of a travel agency, quality could be measured by a satisfaction survey. In the case of an industry, a Ishikawa diagram sheet (cause and effect), could show the most important quality indicators linked to which problems were generating a bad result:

Other Classifications:

If you look in the literature linked to performance indicators, you could find classifications related to capacity (limit), productivity, delivery, among others.

Example of performance indicators for specific areas within companies

Looking now on the other hand, there are indicators that are essential for some specific areas of a company. Check out some examples of indicators for certain sectors that are important in managing an organization:

Finances

The financial area is one of the most relevant to any business. Here you can find some very important indicators like:

• Recipes
• Expenses
• Profit or Loss
• Profitability

All of these can be measured with a good spreadsheet cash flow:

Depending on the company, other financial indicators can be considered as KPIs, everything will depend on the reality of it. Some that deserve to be cited are:

• Working capital available
• EBITDA
• Indebtedness
• Investment liquidity

Sales

Another important area, because it involves the financial result directly is sales. Here you can have indicators like:

• Sales success rate (number of sales made divided by the number of trades)
• Sales Funnel
• Revenue per seller
• Recipes by region
• Revenue per sale

Some of these indicators you can find in our customer prospecting worksheet:

Human Resources

When the subject is people management, a human resources area will present important indicators to understand the reality of the company when it comes to the satisfaction of its employees. A good one spreadsheet of human resources indicators may involve:

• Turnover index (evaluates the degree of employee turnover)
• Absenteeism Index
• Number of layoffs
• Number of hires
• Number of trainings performed
• Climate research

Finally, it is safe to say that the indicators have the objective of extracting from data and results their broadest meaning in order to support business progress and follow-up of strategic planning, bringing in the short or long term the desired results.